Where are all the homes for sale?

With the housing market stuck at the bottom and nobody really buying, you would expect that, in this buyer’s market, there would be a ton of homes for sale to choose from. Well, not so fast.

Last week, the National Association of Realtors announced that the number of listings in the month of September dropped to a four year low. Nationally, there were 2.19 million homes on the market, 20% less than the prior year and the smallest amount since they begun tracking this statistic in January 2007.

It’s no different in the Bay Area, where the inventory in the San Francisco metro area declined to 5,516 listings, a number that is down by 20.78% from last year. The Oakland metro area saw a bigger drop. The 7,338 homes for sale in September is down 37.58% from the prior year. While September usually shows a general decrease in homes on the market, after the traditional home buying summer season, inventory seems to be hitting a new bottom.

So, while it’s supposed to be a buyer’s market, there seems to be less and less to choose from. And the law of supply and demand in economics typically tells us that as supply decreases, prices go up. That hasn’t been the case. Instead, the data is contradictory – prices keep dropping, homes take longer to sell, and the number of homes on the market become fewer and fewer.

Nick Timiraos at the Wall Street Journal wrote that it’s more likely due to the the lack of quality homes, located in the right places and priced correctly. While want-to-be homeowners are out there, the pickings are slim and not up to snuff.

The easiest explanation is that there may be too many homes for sale in the wrong places. During the housing boom, many homes were built in far-flung locales that aren’t as attractive today.

Second, many homes listed for sale may be over-priced, exacerbating the challenge of declining inventory. Some sellers may be listing their homes at wildly unrealistic prices because they don’t want to have to sell their home in a short sale…

Third, short sales make up a large chunk of sales in many hard-hit markets, and some home buyers have steered clear of short sales because those deals can take months to complete. They’re also liable to fall through at the last second.

Which seems to make sense. We’ve written a few times about homes in Marin and the East Bay that were snatched up in days after being listed – true case studies that show if the home and the price is right, the demand is there.

Readers – what’s your take? Are you on the prowl for a new home and don’t see much quality inventory out there?